ROBERT ENGLER'S Politics of Oil which appeared in 1961, was a stunning piece of research and analysis. A unique case study of the political power of an industry, the book changed the way many people thought about the oil companies.Sixteen years later, The Brotherhood of Oil has less impact, not because Engler's research is less thorough or his observations less trenchant but because the story has become familiar. Anthony Sampson in The Seven Sisters, John Blair in The Control of Oil, several congressional committees, environment groups, and a dozen investigative reporters have been working over the energy industry intensively in the last few years.
Nevertheless, Engler's book is an important contribution because he focuses on the sources of the energy companies' political and social powers and how they are used. One crucial source is control of information. Knowledge of oil reserves, the state of technology, future location of refineries and new areas of exploration, and future plans for the investment of profits are all crucial data for determining a national energy policy, and they are all in the exclusive control of the energy companies. At the height of the 1973 crisis, as Engler shows, the companies resisted disclosing information as to crude stocks, refinery runs, and inventories at each of their locations. "When Connecticut's attorney general sought figures from the United States Army Corps of Engineers on oil shipments into his state's port," Engler reports, "he was told this was 'proprietary information.'" Richard Helms testified that "one of the hardest jobs" the CIA has is to get information from the companies on reserves, pricing, production, and political directions in such countries as Venezuela, Saudi Arabia and Iran. According to the Comptroller General of the United States, the Bureau of Mines does not verify information on reserves received from the American Petroleum Institute and the American Gas Association because the policies of these industry associations "prohibit verification."
"The United States government," Engler concludes, "has lacked basic and complete figures about energy reserves, the relations between varying prices and production potentials, and about stocks held or controlled by individual corporations at home or abroad. Nor does it possess reliable knowledge about the industry's overall refinery construction plans, while the corporations have guarded specific breakdowns of refinery runs. Correlations between the government investment incentives and producity are almost nonexistent."
Scattered through his well-written book is disturbing evidence of how little connection there seems to be between subsidies to oil companies and the discovery and development of new oil. Despite years of special tax benefits "not one major new refinery was costructed on the East Coast in the fifteen years prior to 1973." The huge profits, which jumped 70 per cent in the year of the "energy crisis" have been invested substantially in foreign oil production, horizontal expansion into coal and nuclear energy, and in the acquistion of companies like Montgomery Ward.
Engler makes clear how the oil companies manipulate prices, how they take advantage of real shortages to raise prices, how they extract the profits and slough off the losses associated with the energy crises, how they control the peace of technological development, how they affect demand. The sources of political power, by now another familiar story, are here too; the illegal campaign contributions, the massive bribes, the generous loaning of oil company executives to fill key government positions for making national energy policy.
More than any other economic institution, the energy companies seem to have the capacity to turn mistakes and miscalculations into profits. If Engler's account of their pervasive power is correct, and his previous scholarship has stood the test of time, then we must be skeptical indeed about the President's energy program. That program rests on two assumptions which have little historical support. One is that the government will be able to do the minimum planning necessary to stave off national disaster. Yet, planning without the essential information that is in the hands of the companies is impossible. The other is that incentives to companies (in the form of deregulation of "new" oil) and disincentives for consumers will balance supply and demand. Engler's account of corporate and consumer behavior over the past generation offers little hope that the Schlesinger package can bring about the massive redirection of energy consumption that the long-term interests of the country require.
Engler is skeptical about divestiture as a solution to the problem of power in the energy industry. Trustbusting, he says, "functions as timorous research or a common scold." He also rejects government ownership of a majority of shares, citing British Petroleum, where the crown has had a controlling interest since 1914, as evidence that stock ownership alone does not encourage "any higher adherence to public objectives." His solution is democratic planning by a "network of representative planning bodies sensitive to communal resource and ecological concerns." He suggests that the ingredients of a successful energy policy exist - a state of energy board selected by a local public energy districts as suggested in model legislation introduced in Vermont and Maine; municipally owned power systems; a national power grid system; public development of oil public lands; a "temporary national energy committee" to consider these and other alternatives. The ideas are suggestive but they are too sketchy to advance the debate very far. Without an alternative energy policy rooted in the needs of communities - planned in the communities as well as by national authorities - crucial resource planning will continue to be under the direction of the brotherhood of oil.